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Yahoo
13 hours ago
- Business
- Yahoo
Spice giant McCormick warns tariffs could cost $90M a year
This story was originally published on Food Dive. To receive daily news and insights, subscribe to our free daily Food Dive newsletter. McCormick said Thursday the Trump administration's tariff policy could cost the company up to $90 million a year as the flavoring giant contends with higher prices for spices that cannot be commercially grown in the U.S. The spice maker is planning to selectively raise prices in the fourth quarter after seeing the 'cost of certain commodities coming in higher than we had planned,' Executive Vice President and CFO Marcos Gabriel said on an earnings call. McCormick is also using advanced analytics to identify alternative sourcing locations where possible, which is expected to offset a significant portion of tariff costs, according to Gabriel. While McCormick is exploring alternative sourcing options for imported agricultural products, CEO Brendan Foley acknowledged that some raw materials cannot be substituted because they are 'not commercially available in the United States.' The company's portfolio includes about 17,000 ingredients across 90 markets. McCormick is minimizing its reliance on any one country, especially as rapid trade negotiations lead to a different set of duties depending on the geography. The company is 'pulling all the levers that we can to mitigate the impact,' Gabriel said. Consumers have increasingly demanded global and exotic flavors such as yuzu or lychee, especially as more culinary enthusiasts look to recreate the restaurant experience at home due to persistent inflation. Tariffs could raise prices for many of these trendy ingredients, which are native to growing regions outside the U.S. Even McCormick's flavor of the year, which the company unveils annually to highlight culinary trends, isn't spared from tariffs. This year's flavor, the Aji Amarillo pepper, is from Peru, which is currently subject to 10% baseline tariffs. After a 90-day pause from the Trump administration, sweeping tariffs are set to go into effect July 9 on countries without trade agreements in place. The move is expected to raise prices of spices including table salt, black pepper, vanilla, cinnamon and nutmeg, according to the American Spice Trade Association. 'The vast majority of spices cannot be grown in America in quantities sufficient for commercial use,' the association wrote in a March letter to the Trump administration, adding that higher costs will either be passed down to consumers or absorbed by food manufacturers. McCormick's second quarter earnings beat analyst expectations, with sales rising 1% on higher volumes. The spice maker is seeing accelerated interest from food companies interested in making their portfolios healthier or reformulating their products to remove artificial dyes. Recommended Reading Food manufacturers seek tariff exemptions from White House for some imports Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
a day ago
- Business
- Reuters
Spice maker McCormick beats quarterly profit estimates on cost-saving efforts
June 26 (Reuters) - Flavoring products maker McCormick (MKC.N), opens new tab on Thursday beat Wall Street estimates for second-quarter profit, aided by the resilient demand for its higher-priced products and cost-saving initiatives. Waning consumer confidence has led to customers opting to eat at home more than dining out, boosting sales for packaged foods companies such as McCormick despite the looming economic uncertainty. "We are well positioned with our robust plans to mitigate current tariff related costs, fuel growth investments, and expand operating margins," CEO Brendan Foley said. The Cholula hot sauce maker's heavy marketing and promotional investments have also brought back customers previously lost to lower-priced competitors, including private label brands. The Hunt Valley, Maryland-based company's quarterly volumes rose 1.3%, while its prices were up 0.3% from a year ago. McCormick plans to mitigate the additional tariff-led costs through product-sourcing strategies and cost-savings initiatives under its comprehensive continuous improvement program. The company reaffirmed its annual forecasts, taking into consideration the 10% tariff on U.S. imported goods and an incremental 30% tariff on goods from China. For the fiscal year, McCormick expects flat to 2% increase in sales and adjusted earnings per share of $3.03 to $3.08. Most of its U.S. imports from Mexico and Canada are compliant with the country's trade agreement, the company said. The spice and seasoning maker's net sales rose 1% to $1.66 billion in the quarter ended May 31, in line with estimates. Its quarterly adjusted profit per share of 69 cents beat expectations of 66 cents, according to data compiled by LSEG. Shares of the company were up 4% in premarket trading following the results.
